Despite evident improvement in transaction volume and investor sentiment in the third quarter of the year, the weakening economic indicators could still negatively affect growth, according to a report compiled by CBRE.
“In particular, the risks associated with volatile exchange rates and monetary policy settings by major Asian governments remain a cause for concern,” said Andrew Ness, executive director of CBRE Research Asia.
Majority of key Asian property markets recovered in Q3 following a short period of uncertainty after the onset of the sovereign debt crisis in Europe. Direct property investment in Asia, excluding land transaction, surged 53 percent quarter-on-quarter to US$18 billion.
Overall, Asia saw a 102 percent growth in transaction volume to US$46 billion in the first three quarters of the year, compared to the previous year.
Hong Kong recorded the highest investment volume at US$5.2 billion or 29 percent of the total regional volume, followed by Singapore and Japan, which made up 22 percent and 20 percent of the total volume, respectively.
China, South Korea and Singapore also saw strong quarter-on-quarter growth in transaction volume at 191 percent, 165 percent and 161 percent, respectively. According to CBRE, institutional investors continued to show a strong appetite for prime investment real estate in these markets.
CBRE, however, warned that the substantial quarterly growth in investment volume could be partly due to the strengthening Asian currencies against the greenback in Q3 2010, which significantly inflated the overall volume in terms of the US dollar.
Real estate investment activity in Asia also soared 80 percent in Q3 to US$3.1 billion. However, the figure is still relatively low than the US$6.3 billion achieved when it peaked in 2007.
The highest amount of investment was seen in the office sector with US$7.4 billion or 41 percent of the total investment volume in Q3. The office sector also accounted for six of the ten largest transactions in the quarter.
Among the most active office markets included Singapore, Hong Kong and South Korea, which collectively accounted for US$5.3 billion in transactions.